When you take out a home loan, the Loan-to-Value Ratio (LVR) — the ratio between your loan amount and the property value — is one of the key factors banks use to decide your interest rate.
And here’s something many people don’t realise:
If your property value has gone up, you may be able to negotiate a lower interest rate — but only if you ask for it.
🔍 Why is LVR so important?
➡️ Higher LVR = higher risk for the bank = higher interest rate
➡️ Over time:
- Your loan balance decreases as you repay principal
- Your property value typically increases
This means your current LVR is usually lower than when you first bought your home — which can qualify you for a better rate.
🌈 Example
When you bought the property:
- Loan: $500,000
- Property value: $600,000 → LVR = 83%
Now:
- Loan balance: $450,000
- Property value: $750,000 → LVR = 60%
➡️ Your LVR has dropped by more than 20%.
➡️ But banks don’t automatically revalue your property, so your interest rate may still be based on the higher original LVR.
If you don’t request a review or refinance, you could be paying more interest than you need to.
🤔 So what should you do?
1️⃣ Ask your bank for a rate reduction
You can call your bank and ask them to reduce your interest rate based on your current LVR.
If they agree to match the market rate, you can save money instantly — with no refinancing required.
2️⃣ Refinance to another lender
If your current lender won’t reduce the rate, refinancing could be a great option (as long as your financial situation meets lending criteria).
A mortgage broker can help you:
- Compare lenders
- Review your borrowing capacity
- Secure a more competitive rate
And refinancing isn’t just for lowering rates. It can also help you:
- Restructure your loan
- Access equity (cash out) for renovations, a car, investments, etc.
- Potentially buy another property
📲 Want to check if you qualify for a lower rate?
Send me a message via Cleverly Finance — I’m happy to help you review your options.
